StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

New Information Technologies and the Stiff Competition Among Companies - Example

Cite this document
Summary
The paper "New Information Technologies and the Stiff Competition Among Companies" is a great example of a report on information technology. This paper is concerned with highlighting the relevance of increased intangible assets as brought about by new information technologies and stiff competition among companies. This has meant that the value of the companies has been rising correspondingly…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER96.1% of users find it useful

Extract of sample "New Information Technologies and the Stiff Competition Among Companies"

Executive summary This paper is concerned with highlighting the relevance of increased intangible assets as brought about by new information technologies and the stiff competition among companies. This has meant that the value of the companies has been rising correspondingly (Aboody, D. and Lev, B., 1998), but most existing accounting frameworks have not been capturing this aspect. New and emerging issues should be quickly solved by reference to an existing framework of basic theory. Over the years, several organizations, committees and individuals have developed and published their own conceptual framework of accounting, but no single framework has been universally accepted and relied on in practice. Conceptual framework for financial reporting is based on its objectives, qualitative characteristics and the concept of recognition and measurement. Many accounting standards and IFRS differ in the way they recognize and measure intangible assets among other things. Recognition and measurement concept explains how, when and which intangible asset and transactions should be measured, recognized and reported by the system of accounting. Companies should prepare their financial statements in an acceptable manner so that they can be compared with the previous year’s statement and with the statements of other companies. According to AASB (2004), stating the financial statements core objectives would be simple if all users had similar needs and interests. Importantly, however, is that accounting information should be free from bias intended to achieve a predetermined result or to provoke a certain mode of behaviour. Freedom from bias is essential as it improves the quality of decisions by decision makers. Increased importance for intangible assets has been as a result of strong business competition and the dawn of advanced information technologies. Beattie (2005) notes that these factors have caused an important change in corporate value. Significant increased have been witnessed in intangible assets related to human resources, intangible assets related to innovation, and organizational intangible assets. There are various cost measurement models used in accounting for intangible assets, and entities reporting the intangible assets in their financial statements employ these models in different degrees and in varying combinations. However, it depends on the accounting policy that is adopted by the entity (Oliveira, Rodrigues and Craig, 2010). These models include initial cost and realizable value. Under the initial cost measurement, intangible assets are initially recorded in their account at cost and no adjustment is made to this valuation in later period except to allocate a portion of the original cost to expense as the intangible asset expires. At the time an intangible asset is originally acquired, initial cost represents the fair market value of the goods or services exchange as evidenced by an arm’s length transaction (Dumontier and Raffournier, 2002). With the passage of time, however, the fair market value of such an intangible asset as copyrights and research and development may deviate greatly from the initial cost. AASB 138 provides that intangible assets are measured initially at cost. Any expenditure on the asset that is subsequent to initial measurement must be expensed unless this criteria hold to be true: it is probable that the asset’s expenditure will result to an increase in future economic benefits in material form of the asset over the immediately assessed standard performance before the expenditure is incurred; and a reliable measurement of the expenditure can be linked to the asset. Paragraph 71 of AASB 138 requires that if an expense is recognized out of expenditure incurred on an intangible asset the expenditure cannot be recognized as a cost of the intangible asset in future time. Both Sonic and Resmedinc companies have been amortising the intangible assets over their useful lives. The policy adopted in Resmedinc is to recognize and amortize new patents over their useful lives of five years and write off the unamortized cost if the patent is superseded. The straight line method is used to amortize the other assets over their useful lives. An impairment review is conducted annually to determine the fair value of its goodwill. Higson (1998) clarifies that there are many ways of acquiring an intangible asset which include: separate acquisition in which case the criteria of probability recognition must be satisfied for the intangible assets that are separately acquired. Intangible assets can also be acquired through business combinations. The assets acquired through this method are initially measured at fair value and not initial cost. This is a requirement by the AASB 3 that deals with business combinations. Intangible assets acquired through government grant include licences, quotas or rights to accessing restricted resources. Under this acquisition, a choice is left for accountant to make initial recognition of the asset at fair value or cost. Generating intangible assets from within the company is another way of acquiring the intangible asset. The internally generated intangible assets include research and development, brands, publishing titles, mastheads and customer lists. Goodwill is also generated internally but according to the definition of intangible assets by AASB 138 it is not an intangible asset and hence is excluded from recognition. Since goodwill is the amount by which interest of the acquirer in the net value of the identifiable assets and liabilities is over the acquisition cost, it means that the value of an entity is greater than the value of its separate tangible assets. Therefore, goodwill is a composite asset which cannot be identified individually but its identification is only related to the total value of the entity during acquisition. Goodwill is an intangible non-current asset which cannot be realized on its own (Hirshey, Richardson and Scholz, 2001). During acquisition, the acquirer recognizes the acquired goodwill, as an asset, and measures it initially at cost. Intangible assets are defined by AASB 138 as category of assets, though identifiable, they are non-monetary and have no physical substance. In essence, it means that this category of assets cannot be held in money and they can neither be received in determinable or fixed amount of money. Therefore, their main characteristics are that they are non-monetary, identifiable and they do not have physical substance unlike the plant, property and equipment which have physical substance (Kallapur and Kwan, 2004). Intangible assets can be categorized as identifiable and unidentifiable. The main identifiable intangible assets in Resmedinc are patents and developed product technology. There are other identifiable assets like trade names and customer relationships. The major unidentifiable intangible asset is goodwill. Sonic Company has only disclosed and reported goodwill; however, the other types of intangible assets are not shown, but they are only grouped and reported as ‘intangible assets’. In order for an intangible asset to be regarded as identifiable, any of these criteria must be met: the identifiable asset must be separable from the company such that it can be transferred separately, for instance, you cannot separately transfer non-contractual customer relationships and customer lists; the asset must have resulted from a contractual right or other legal rights, for instance, trademarks and franchise agreements. Non-physical assets have unique features in that they are non-rival, they involve huge fixed costs and insignificant marginal costs, unlike physical assets they are not subjected to diminishing returns, it is not easy to operate and manage as the case in tangible assets, and generally there is no organized and competitive markets for intangible assets (Lev, 2001). The conceptual framework defines an asset as a resource controlled by the business entity. However, it can be difficult to establish control since it originates from legal or other rights. For instance, highly trained expertise cannot qualify as intangible assets since the entity cannot exercise control over them. However, differences in the operating policies among different enterprises results in the adoption of various accounting practices. Whatever practice adopted the company has to maintain consistency in its application in order to allow comparison between different accounting periods (Lev and Sougiannis, 1996). Information that has been measured and reported similarly is considered comparable and that is why Australian government made it compulsory for all reporting entities to adopt IFRS. The disclosure principle requires that financial statements be complete in the sense of improving all information necessary to users of the statements. CCH Editors (2008) argues that if the omission of certain information would cause the financial statements to be misleading, disclosure of such information is essential. Lev and Zarowin, (1999) insists that disclosure is necessary in financial statements if it can have an impact on decision made. In deciding on the materiality of an item in terms of financial statement disclosure, accountants should consider whether knowledge of the item would likely to influence the decision of users of financial statements since that which is material for one entity may not be material for another entity. According to Akman (2011), financial disclosure has been found to increase after the adoption of IFRS. However, this does not eliminate the impact of culture on disclosure of financial information.  As such, disclosure of financial information though improved, still remains subject to the company’s cultural background. Accounting information should show an agreement between a measure and real world phenomenon that the measure is supposed to represent. The truth of accounting information should be verifiable by examination of evidence of underlying facts. References AASB (Australian Accounting Standards Board), 2004. Framework for the Preparation and Presentation of Financial Statements. Melbourne: Australian Accounting Standards Board. Aboody, D. and Lev, B., 1998. The value relevance of intangibles: the case of software capitalization, Journal of Accounting Research, 36 (Supplement), pp. 161–191. Akman, N. (July 2011). The effects of IFRS adoption on financial disclosure: does culture still play a role? American international journal of contemporary research, vol1, No 1.  Beattie, V., 2005. Moving the financial accounting research front forward: the UK contribution, British Accounting Review, 37, pp. 85–114. CCH Editors. (2008). Australian Master Accountants Guide. Sydney: CCH Australia Limited. Dumontier, P. and Raffournier, B., 2002. Accounting and capital markets: a survey of the European evidence, European Accounting Review, 11 (1), pp. 119–151. Higson, C., 1998. Goodwill, British Accounting Review, 30, pp. 141–158. Hirshey, M., Richardson, V. and Scholz, S., 2001. Value relevance of non-financial information: the case of patent data, Review of Quantitative Finance and Accounting, 17, pp. 223–235. Kallapur, S. and Kwan, S., 2004. The value relevance and reliability of brand assets recognized by U.K. firms, Accounting Review, 79 (1), pp. 151–172. Lev, B. and Sougiannis, T., 1996. The capitalization, amortization, and value-relevance of R&D, Journal of Accounting and Economics, 21, pp. 107–138. Lev, B. and Zarowin, P., 1999. The boundaries of financial reporting and how to extend them, Journal of Accounting Research, 37 (2), pp. 353–385. Lev, B., 2001. Intangibles: Management, measurement and reporting. Washington DC: Brooking Institution Press. Oliveira, L., Rodrigues, L. and Craig, R., 2010. Intangible assets and value relevance: Evidence from the Portuguese stock exchange, The British Accounting Review, 42 (4), pp. 241- 252. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(New Information Technologies and the Stiff Competition Among Companies Report, n.d.)
New Information Technologies and the Stiff Competition Among Companies Report. https://studentshare.org/information-technology/2080558-intangibles
(New Information Technologies and the Stiff Competition Among Companies Report)
New Information Technologies and the Stiff Competition Among Companies Report. https://studentshare.org/information-technology/2080558-intangibles.
“New Information Technologies and the Stiff Competition Among Companies Report”. https://studentshare.org/information-technology/2080558-intangibles.
  • Cited: 0 times

CHECK THESE SAMPLES OF New Information Technologies and the Stiff Competition Among Companies

The Strategic Threats Facing Google

he mission statement of the firm, which is to sort out the worlds' information, makes it available and helpful to its users; moreover, this statement refers to their goals; however, it is not reflecting how the firm is supposed to earn profits and revenue.... It enables individuals to get information that is kept in several other sites....
5 Pages (1250 words) Research Paper

Market and Competitors of the Biotop Company

It is therefore; clear that market research is useful as managers of different companies undertake this process so that they can make decisions on how to run their daily activities.... This implies that companies that use market research technique as a guide are able to avoid surplus production meaning they always produce what is needed in the market and in the correct amounts to avoid wastage and loss.... There has been significant growth in this industry since it was initiated, as many companies offering the same type of services have been developed....
6 Pages (1500 words) Essay

What Competition Does Novosco Face in the UK Cloud Technologies

Novosco competition among Cloud Technologies, Managed Service, and Consulting Companies Novosco is the leading provider of managed services and cloud-based infrastructure in the U.... Novosco seeks to enroll its services to the wider market and its directors know that it will face stiff competition from established companies (WEIR 2013, p.... It provides unique consulting talent and technical support to the organization seeking to maximize the advantages of their investment in information technologies....
9 Pages (2250 words) Case Study

Competitive GSM Companies in Kazakhstan

This case study "Competitive GSM companies in Kazakhstan" is about analyzes the competition between GSM companies in Kazakhstan, particularly 'K'cell' and 'K-mobile'.... The research question is whether there is true competition between GSM companies in Kazakhstan, especially between 'K'cell' and 'K-mobile'.... The spotlight of the research is how competition affects people living in Kazakhstan.... In the contemporary phase, there is hardly any industry or company that operates without smart application of information communication technologies benefits....
11 Pages (2750 words) Case Study

Business of the Burberry Clothes Designer Company

Due to the changes that come from the new technologies and globalization, the meaning attached to their clothing by their consumers has greatly changed.... This is besides the fact that the clothing company has the desire of growing and expanding its influence using newer technologies and their globalization efforts.... This, in turn, means that the choice the consumer makes and wants to be associated with enables him to propel himself or herself among her society....
9 Pages (2250 words) Case Study

Marketing Manager of the PVT

After officially knowing on the criteria and the tools that Morgan used to evaluate these companies and how he reached the results that eliminated PVT as a potential bidder, PVT may draft the course of action to fix the current situation or be a force to reckon with on future competitions and contracts.... Since numerous players who have joined the same market, PVT must not assume that there are no other companies producing the same products, as in this case, converters with the same quality, durability, efficiency, and effectiveness and at lower costs than it thereby placing out of the competition is....
4 Pages (1000 words) Research Paper

Module: Managing Competitive Advantage

In order to do this, companies have to keep investing millions of money in market research and related activities.... In this regard, companies making such products have to ensure that in their market research, they examine all these changes and others, then develop their strategies that enhance their competitive advantages (Pickens 2008, p.... business management, there have been a lot of economic liberalizations, which have increased the number of business activities, thus creating extreme competition....
12 Pages (3000 words) Essay

Importance of Technology in Organizations

7)Recent studies and surveys indicate that the top ten companies in various industries had shifted IT from administrative functioning to more strategic functioning.... This implementation has proved advantageous and profitable for many companies.... The paper "Importance of Technology in Organizations" is a wonderful example of a report on information technology.... 'All organizations, it appears, must face the so-called information age head-on and prepare for new world order....
10 Pages (2500 words)
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us